Basel III Start Delayed as Bank Regulators Review Comments

Nov. 9 (Bloomberg) -- U.S. regulators won’t hold banking
companies to a Jan. 1 deadline they wrote into proposed rules
for boosting the reserves lenders must hold against potential
losses, they said today.

The Federal Reserve, Federal Deposit Insurance Corp. and
Office of the Comptroller of the Currency “do not expect that
any of the proposed rules would become effective” at the start
of next year, as they continue weighing views expressed during
the comment period, they said in a joint statement.

The agencies are working “as expeditiously as possible”
on rules proposed in June to align U.S. banks with standards set
by the Basel Committee on Banking Supervision. The international
accords set a Jan. 1 deadline for boosting capital requirements
to guard against a repeat of the 2008 credit crisis. Most Basel
committee member nations have yet to complete work on the rules.

Today’s statement was a response to concerns expressed by
industry participants that they would have insufficient time to
understand the rules or make system changes by Jan. 1. The
American Bankers Association, Financial Services Roundtable and
the Securities Industry & Financial Markets Association have
said the rules as proposed could hurt credit availability, damp
economic growth and hurt U.S. competitiveness.

“As with any rule, the agencies will take operational and
other considerations into account when determining appropriate
implementation dates and associated transition periods,” the
Fed, FDIC and OCC said in the statement.

The U.S. proposal calls for all banks to maintain “loss-absorbing capital” of at least 7 percent of risk-weighted
assets.

‘Drawing Board’

David Stevens, president and chief executive officer of the
Mortgage Bankers Association, called the delay a positive
development that may signal regulators “are going back to the
drawing board.”

“It is critical now that regulators re-propose Basel
implementation rules that more appropriately allocate risk-weights on real estate-related assets,” Stevens said in a
statement. “Otherwise, credit for real estate transactions will
tighten and consumer and borrower costs will go up, as banks
reduce their real estate lending and mortgage servicing
business.”

The delay is “disappointing news” but not surprising,
according to Sheila Bair, who served as FDIC chairman during the
period when the Basel accords were being negotiated.

“It is important for the U.S. to exercise leadership,”
she said in an e-mail statement. “We don’t want to send a
signal to the world that we are backing off in any way.”

Bair, who said she shares industry concerns that the U.S.
proposals are too complex, leads a group of former regulators,
lawmakers and business leaders that favors giving priority to
imposing Basel rules for “large, internationally active banks”
and boosting the leverage ratio to 8 percent.

Representatives from the Fed, OCC and FDIC will face
questioning on Basel implementation on Nov. 14 at a Senate
Banking Committee hearing on the rules.